While there are varying opinions about cryptocurrency, you can’t deny that there’s some serious money to be made in this industry. Unfortunately, it’s also really easy to lose hefty sums of money if you fall into the marketing and hype. What are some tried and tested ways to know a crypto project will rise?
You can estimate, to a fair degree, whether a crypto project will rise or not based on the project’s utility, its current trading volume and market capitalization, how much supply and demand there is, and past trends. It also helps to look at the team and investors behind the project.
Let’s look at each of these factors in more detail and find out how you can use them to predict whether a crypto project will rise or not correctly. Keep reading to learn more.
1. The Project Provides Utility
The first thing we’ll be looking at is how much utility the project provides. Cryptocurrencies are, for many people, a means to store their wealth digitally. However, modern-day cryptocurrencies can do much more than that.
With the advent of Web3.0 and similar prospects, cryptocurrencies are able to provide their users with practical utility and benefit.
NFTs based on the Ethereum blockchain is a perfect example of said utility. Not only are they a way for people to store monetary value, but they can also be used to transfer and verify ownership of visual and auditory data, such as artwork and music.
Ethereum also provides the infrastructure needed for the development and operation of dApps (decentralized applications). This feature has been picked up by several other cryptocurrencies as of late.
When trying to determine whether or not a crypto project is suitable for investment, try to look for the utility it offers to its users. If it’s a newer project, you can find this information on the published whitepaper.
Learn more about the value that the project seeks to provide and the problems that it aims to solve. Is it useful and likely to be adopted?
Cryptocurrencies that provide real value and utility are likelier to succeed than those that merely exist for the sole purpose of being a sort of digital bank.
While Bitcoin remains the biggest currency by market capitalization today, experts speculate that it may be overtaken by Ethereum simply because of how much more value and utility the latter provides.
2. A High Trading Volume
The next way you can tell that a cryptocurrency will rise is by looking at its trading volume. As the name implies, trading volume refers to the number of trades that occur within a defined timeframe.
It’s quite intuitive why this is important. Higher trading volumes suggest more popularity and activity. By contrast, low trading volumes make it harder for buyers to liquidate their assets timely and discourage investor activity.
Unfortunately, a high trading volume in and of itself isn’t a great metric to rely on. This is because, due to the unregulated nature of cryptocurrency, there are ways to artificially raise the trading volume in an attempt to lure in investors and an audience.
If you know that the team behind a project is reputable and won’t resort to underhanded tactics of this sort, then a high trading volume is a great sign that the project may rise soon.
If the project displays a high trading volume and an uptrend in value concurrently, it’s a sign that investors are looking to buy in, and demand is increasing. Which is a good thing.
3. Price and Market Capitalization
Thirdly, you can use coin price and market capitalization to know whether your target crypto project will rise. Market capitalization is essentially the price of each token or coin multiplied by how many total tokens or coins are in circulation.
It gives you a general idea of how successful or, to be more precise, valuable the project is.
Naturally, low prices and market capitalization are typical of projects in their early stages.
High coin prices and market capitalization, as you might imagine, are more commonly seen in already established projects, such as Bitcoin and Ethereum.
Unfortunately, this does mean that the project is near its ultimate potential and is unlikely to see a dramatic rise in value. High prices also mean that the investors who brought in when prices were low will be looking to cash out.
This might lead you to believe that projects with low market capitalizations are where the money is at. Unfortunately, it’s not so simple. While these projects do have greater growth potential, it’s also much more likely for them to simply fail before they can take off. That’s not uncommon with new cryptocurrencies.
To make sure you don’t end up investing in a currency that ultimately dies off, choose a well-known currency developed by a reputable team and, perhaps, backed by some affluent investors. (More on that later.)
To sum up, a newer currency with a lower price and market capitalization has more potential for growth than already-established currencies.
4. Limited Supply and High Demand
Supply and demand dictate, to a considerable degree, the value of a cryptocurrency at any time. I would advise you to go for a coin that has a limited supply.
Bitcoin, for example, has a maximum supply of 21 million coins. There are over 19 million units in circulation as of the time of writing, which means that only 2 million more will ever be produced.
It’s also no secret that the demand for Bitcoin remains relatively high. Although the currency did see a recent crash, investor confidence remains high.
As Bitcoin nears the 21 million mark, supply will drop, and assuming demand stays the same, the coin’s value will rise sharply.
Some coins do not have a maximum threshold built into their code. Ethereum is the most popular example of such a coin. Even though there’s no theoretical maximum, production has decreased sharply in recent years to maintain the fragile supply and demand ecosystem.
Coins that have an unlimited supply are, theoretically, bound to end up losing value as more are produced.
A project that’s nearing its theoretical maximum while retaining consumer interest all the same, on the other hand, will likely see its value increase proportionally with the decrease in supply.
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5. Positive Trends in the Past
Crypto gurus will have you believe otherwise, but truth be told, it’s not easy to accurately predict the future value of a particular cryptocurrency. You can, however, consider how the past played out and use that information to make a better decision.
Cryptocurrencies that display a steady and consistent uptrend are likely to be safer investments than those that are more volatile and all over the place.
Admittedly, it can be hard to make sense of the complicated and detail-rich trade graphs you see on exchanges. A technical analysis tool can help out with this process.
6. A Reputable and Experienced Team
Before investing in a crypto project, it’s important to familiarize yourself with the team.
You want to ensure you’re not investing into a coin bound for failure because of an inexperienced or incompetent team. Learn more about the team, their aspirations, their credibility, and their competence.
Find out what crypto projects they’ve worked on in the past and how those ended up.
Check out the whitepaper. You can find most of the information you need to verify the credibility of the project and team on the document.
It’s ill-advised to invest in a small-scale crypto project run by a team that’s unheard of. Worse yet would be putting money into a crypto project developed by a team with undisclosed identities.
Unfortunately, scams are very much a reality in today’s climate, so you do need to be on the lookout for signs of fraudulent activity or suspicious behavior.
Pump and dump schemes, in particular, have become increasingly prevalent in the market.
Initial investors holding massive amounts of the coin use social media hype and influencer endorsements, among other secretive tactics, to artificially inflate the value of their coins.
Once enough people buy in, these big investors sell out, resulting in a major crash in the currency’s value. Of course, everyone who is brought into the hype ends up losing significant amounts of money.
The initial investors walk away with bags of money, never to be heard from again.
To avoid falling victim to such a scheme, invest in only those projects you know to be genuine and projects run by reputable teams with a portfolio of prior experience to prove their expertise.
The bottom line is that you should look for a project run by competent and reputable people. Even if it’s not an intentional scam or fraudulent scheme, a project launched by an unskilled team can lead to you losing your investment.
7. Investors, Backers, and Supporters
While looking at the team, it also pays to look at the investors and backers behind the project. This is especially helpful if you don’t really want to spend time researching the team itself.
If a project is promising enough to warrant the attention of big players in the industry, you can be confident you’re making a good decision by investing. Check out the investors and see if there are any names you recognize.
Something important to mention here is that Hollywood celebrities and social media influencers don’t make for the best crypto advisors.
These popular figures are often paid for a feature or endorsement, so be wary of taking them on their word. It’s your investment that is at risk, after all.
Organizations and corporations, on the other hand, make for excellent backers. Big companies are after one thing: profit. If you see them investing in a crypto project, you can be sure they did their research and were convinced by what they discovered.
All in all, having robust investors and backers is a good indication of a successful crypto project.
8. A Positive Public Response
The public’s response to a project is another key indicator of how successful the project will end up being. The general thoughts and sentiments associated with the project should give you a good idea of how likely people are to invest.
Is the public enthusiastic about this new project? Does it look like the project has managed to gather trust and confidence? If so, people will likely invest, and coin value will increase.
Conversely, if the general public seems skeptical and untrusting, the project may just be passed off as the next big crypto scam and not see many investments at all.
Taking into consideration public opinion is important. You can use social media sites for this purpose. However, it’s important not to take anything on the internet at face value.
Recently, social media platforms have been plagued by bots pretending to be human beneficiaries of some obscure cryptocurrency. This is, of course, just disguised promotion. Perhaps an underhanded tactic to artificially inflate value and trade volume to encourage investment.
If you’re net-savvy, you can probably tell the bots apart from the real people. Still, always air on the side of caution.
9. Upcoming Events That Might Impact the Value of the Project
Lastly, you want to look at any upcoming events that may influence the project’s current price. So, for example, do you recall how dramatically Dogecoin blew up when Elon Musk tweeted about it?
Yes, that can hardly be called a foreseeable event, but the point is that real-life events have a major impact on the value of any cryptocurrency at any time. Coins and tokens can plummet to failure or skyrocket to the moon overnight.
As a crypto trader or investor, you need to be up to date with the latest in the industry. You also need insight into what’s expected to happen in the future.
A good way to acquire this insight is by checking the project’s roadmap. A roadmap is a document similar to a whitepaper. It lays out all the details regarding future developmental milestones.
Ethereum, for example, will soon be transitioning entirely to a proof of stake system, which is expected to decrease energy consumption by 99.5%. ‘The Merge’ is the largest update Ethereum has seen to date and will undoubtedly impact its valuation.
Like Bitcoin, Ethereum had been down in the dumps for a few months. However, we are now seeing a small but noticeable uptrend in Ether’s value.
According to experts, Ether will see a rise in value following the completion of the merge. Whether or not things play out according to plan remains to be seen; both proponents and opponents of the evolving cryptocurrency await in anticipation.
In the world of cryptocurrency, where fortunes can be made or lost rapidly, understanding the factors that determine a crypto project’s potential for success is crucial. Cryptocurrency offers significant financial opportunities, but it’s equally easy to incur losses if you succumb to marketing and hype. This article outlines nine essential ways to gauge whether a crypto project has the potential to rise in value.
In summary, assessing a crypto project’s potential for growth requires a comprehensive evaluation of its utility, trading volume, coin price, supply and demand, past performance, team credibility, investors, public sentiment, and upcoming events. Careful consideration of these factors can help investors navigate the volatile world of cryptocurrency with greater confidence.